Consult Your Banker

Look for ways to tighten your financial belt

Projections point to tighter margins for grain producers in 2015 and beyond. Instead of dreading the future, James Mintert, director of the Center for Commercial Agriculture at Purdue University, says farmers need to tighten their financial belts to prepare for leaner times. “Farmers need to get their financial house in order while they are still in a relatively strong position,” he says.

Recently, many farmers have invested in capital assets, such as land, grain systems and other high-dollar
facilities. “A lot of that was done with relatively short-term debt,” he says. “You should now look at the possibility of refinancing that debt on longer repayment terms.”

Cash will be king as profits dip. “If you have cash, preserve it,” Mintert says. “Protect working capital and get ready for challenging times, not just in 2015 but several years out.

“In recent years, you could finance long-term purchases with short-term debt and get away with it because of such strong cash flows, but that’s not going to be the case the next several years,” he adds.

Spend time informing your banker of the new crop price reality. “If you work with a lender now, while your balance sheet and financial position are still strong, you’ll find lenders relatively interested in working with you,” Mintert says. “If you wait until you’re in trouble making payments, a lot of financial instructions will be reluctant to work with you.”